SpareBank 1 SR-Bank: Quarterly Report - 4th Quarter 2004
- Return on equity after tax: 19.5% (15.2%).
- Group profit after tax: NOK 583 million (NOK 408 million)
- Interest margin: 2.03% (2.12%)
- Net other operating income: NOK 701 million (NOK 632 million)
- Operating costs: NOK 961 million (NOK 922 million)
- Net losses: NOK 81 million (NOK 250 million)
- Gross defaults: NOK 203 million (NOK 426 million)
- Growth in lending past 12 months: 11.4% (7.5%)
- Growth in deposits last 12 months: 17.0% (2.3%)
- The board proposes a dividend of NOK 23 per primary capital certificate
- The board proposes allocation of NOK 60 million to the endowment fund
(Figures in parentheses are for 2003)
SpareBank 1 SR-Bank achieved a group profit before tax of NOK 788 million in 2004. This is NOK 219 million better than the profit for 2003. The profit after tax was NOK 583 million, up from NOK 408 million in 2003. The return on equity after tax amounted to 19.5 percent compared with 15.2 percent in 2003.
The improvement in profits is due to general success in all of the Group's business areas. The Group has fortified its position in Rogaland as the market leader in the retail market, the corporate market and the real estate business. This has made a positive contribution through the addition of new customers and increased product coverage per customer. Cooperation between the retail market, the corporate market, subsidiaries and the Bank's special departments in the areas of currency/interest, cash management and insurance is an important reason for the profit improvement that has taken place in 2004.
The growth in lending in 2004 was 11.4 percent, and total lending as of 31 December 2004 amounted to NOK 54,4 billion. Loans to the retail market increased by NOK 3.9 billion, an increase of 11.7 percent, while loans to the corporate market and the public sector increased by NOK 1.6 billion, an increase of 10.6 percent. The distribution between loans to the private market and the business market is 68.5 percent and 31.5 percent respectively.
The interest margin in 2004 was 2.03 percent. This is a decline of 0.09 percentage points measured against last year. This decline is primarily due to reduced margins and lower returns on equity capital.
Net interest and credit commission revenues were NOK 1,129 million (2.03%), which is NOK 34 million higher than in 2003. Other revenues accounted for 34.5 percent of total income. The Group's net commission revenues increased by 12.5 percent in 2004 from NOK 303 million to NOK 340 million.
The cost percentage in the parent bank was 49.9 percent, and for the Group 54.5 percent in 2004, compared with 53.5 percent and 57.0 percent respectively in 2003. The Group's operating costs were NOK 961 million in 2004 compared with NOK 922 million in 2003, an increase of 4.1 percent.
Default in the Group exhibited a good development, being reduced in 2004 by NOK 223 million to NOK 203 million. Gross default, as a percentage of gross lending was 0.37 percent as of 31 December 2004, down from 0.87 percent at the end of 2003. Net losses on lending in the Group were NOK 81 million, a decline of NOK 169 million from 2003.
As of 31 December 2004, the Group's total assets were NOK 59.2 billion, an increase of NOK 6.5 billion from 2003.
IFRS-/IAS - transition to new accounting standard (International Financial Reporting Standard)
Starting from 2005, listed companies in the EU/EEA must submit their group accounts in accordance with IFRS/IAS. The objective is for IFRS/IAS to lead to increased use of actual values, so that the accounts more correctly reflect the companies' actual balance sheet values.
For some areas on the balance sheet, the new accounting rules will result in accounting effects. According to the transition rules, these effects can be posted against the equity capital. The transition will entail both positive and negative effects on the equity capital.
The ultimate financial effects of the transition to IFRS/IAS will be clarified by the end of the 1st quarter of 2005.
The Group has not made a final conclusion in all areas linked to the transition to IFRS/IAS.
Preliminary calculations of the consequences and estimates linked to the transition rules show an overall negative effect after tax on the Group's equity capital of approximately NOK 100 million, or 0.3 percent in reduced core capital.
Bonus issue
The board recommends that the supervisory board pass a resolution in its meeting on 31 March 2005 to implement a bonus issue of NOK 226,145,900, followed by a splitting of the primary capital certificate's face value in two. The proposal entails that four old certificates entitle the bearer to one new primary capital certificate, and that the primary capital certificates are split in two so that the face value is NOK 50. The proposal calls for implementing the bonus issue in the 2nd quarter of 2005.
Outlook for the future
The board expects a further strengthening of the Bank's position in its market areas in 2005. The board emphasizes that SpareBank 1 SR-Bank shall be a profitable and solid bank which is an attractive partner for customers, the capital markets, primary capital certificate owners and employees.
More stringent requirements and higher expectations on the part of the customers, combined with continuous advances in technology place great demands on the organization's ability to adapt. The board is of the opinion that the Bank is well equipped to handle these challenges in the years to come. The cooperation in the SpareBank 1 alliance is important in this context, where the Bank can benefit from economies of scale in the areas of brand development, technology and competitive products.
The board expects continued pressure on the interest margin in 2005, however, through increasing other revenues, cost-effective operations and low losses, the board expects a good development for the Group in 2005.
Managing Director Terje Vareberg says he is very satisfied with the profit and the advances made in 2004. This good performance is largely the result of the employees' commitment and willingness to embrace change.
More detailed information may be found in the enclosed quarterly report and figures.
Stavanger, 3 February 2005 <!-- hugin-supplied --><br> The Board of Directors - Sparebanken Rogaland <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> Questions may be directed to Managing Director Terje Vareberg, tel. +47 51 50 95 53/+47 911 00448, Deputy Managing Director Sveinung Hestnes, tel. +47 51 50 95 58/+47 908 53165, Director of Finance Tor Dahle, tel. +47 51 50 95 56/+47 915 47503 or press spokesperson Thor-Christian Haugland, tel. +47 51 50 92 81 / +47 48 03 16 33.